Deeper . . .
and Deeper . . .
and Deeper . . .
. . . into Debt
Most times when I think I’ve heard it all, I’ve only scratched the surface. Payday
Loans did not change that. Let me begin by capturing you’re attention with
391% INTEREST. I wish it were a typographical error, but that was indeed,
Three hundred, ninety-one percent INTEREST. No, I did not do the math, but I
did attend a Payday Loan Public Hearing at the invitation of Stanley Miller,
Executive Director of the Cleveland NAACP. The Public Hearing, subtitled “Call
for Action” should have been enough to make blood run cold in those who
understand just a little of the ramifications of what was shared.
The meeting took place at the historic Antioch Baptist Church where the Pastor
is the Rev. Dr. Marvin McMickle. I was partially correct in believing that the
meeting, hosted by Ohio Attorney General Mark Dann, would be well attended.
How well attended became apparent as I arrived a half-hour early and managed
to find one of the few remaining seats. By twenty minutes before meeting time, it
was standing room only. More chairs were brought out, thanks to the foresight
and hospitality of Rev. McMickle and others at Antioch. Yet it quickly became
once again, standing room only. And that is good news!
The very well attended hearing included many organization and community
leaders, politicians and concerned citizens. In addition to Attorney General
Dann, and Rev. McMickle, included in the program or present in the audience
were Senator Lance Mason, Congressman Tim Hagan, Rita Haynes – CEO of
Faith Community Credit Union, Retired Judge C. Ellen Connaly, Michael Taylor –
Assistant to Congresswoman Stephanie Tubbs Jones, community leader Charles
Bibbs, and others. The proceedings were broadcast live and also recorded by
several TV stations.
Rev. McMickle welcomed guests and shared a brief history of how returning
World War II veterans were denied loans, and responded by forming the Antioch
Baptist Church Credit Union. Rita Haynes shared how the Antioch Credit Union
assisted in the formation of the Mt. Sinai Credit Union, and how the Mt. Sinai
Credit Union eventually became Faith United Credit Union. Faith United
currently has more than 6,000 shareholders and $10,000,000 in assets.
A representative of Policy Matters, Ohio stated that:
1. Payday Loans with associated fees result in annualized interest as high as
2. Payday Lending Locations have increased from 107 to over 1000 in seven
3. Majority of borrowers are repeat borrowers.
4. Loan stores usually cluster together because borrowers can go from one loan
store to another without waiting the 24 hour “cooling off” period.
5. Pay Loan stores typically require no credit checks.
6. Education is not the key, but Payday Loans are a product designed to fail
(and have the consumer become entrapped).
The first five items above were presented as fact, while I consider item 6 as
opinion, and have shared comments further into this article.
A young lady who is a former customer of a Payday Loan Store shared the
following. Although working two jobs, due to separation and ensuing financial
problems she desperately needed funds to carry her over until her legal issues
were over. She borrowed every week for four months, borrowing up to $800 at a
time. The repayment for borrowing $800.00 for a two week period was $912.50.
She finally became aware of any alternative, in this instance the Faith Credit
Union. When asked why she selected a Payday Loan source, she replied that
she worked at a Bank, and knew she would not qualify for a loan because of her
temporary legal situation.
The Chairman of the Ohio Coalition for Responsible
Lending spoke and called for support of Ohio House
Bill 333, which would cap the Payday Loan Interest at 33%.
Other facts exposed included the reality that becoming
involved in the Payday Loan cycle creates a
“cycle of debt” that it is difficult to escape from.
The average Payday Loan Borrower takes
12.6 loans per year.
Summary – I left the hearing before it was over for several reasons. For one, I
had heard enough. The situation is worse than I thought. Another reason is
that it doesn’t take me long to “get it,” particularly when it comes to issues of
economic literacy and economic parity. Another reason is that with my passion
to share, the more I heard, the more I would write.
First and foremost, my thanks to Stanley Miller for promoting the hearing and
thanks to Rev. McMickle for allowing the use of Antioch Baptist Church.
The brief comments shared by Rev. McMickle and Rita Haynes beg to ignite a
spirit within each of us that injustices have, do, and will continue to occur, and
those injustices always have, are now, and will continue to include economic
injustices. Having stated that, I further suggest that their comments should also
remind us that the ability, the desire, the resources, and the implementation of
joint initiatives are among our strongest and most viable tools in the “war on
poverty” the “war against payday loans” and many other “wars.” It should not
take a long stretch of the imagination to relate the formation and growth of credit
unions to a book I authored entitled The Power of Association!
I understand that those who need payday loans are probably not interested (at
least not at that time) in economic literacy, joint initiatives and all that STUFF. I
understand that when you are up to your rear in alligators (or Loan Sharks), it’s
not the appropriate time to drain the swamp. The reality is that just because you
may not be a candidate for a payday loan today, doesn’t mean you won’t be
tomorrow. Things do happen, so if you’re not a victim, thank not your
intelligence, but thank God.
So the system does need repair to help prevent an even greater erosion of our
economy. The terms for payday loans are outrageous, so Ohio House Bill 333 is
a partial solution. I can’t help but be a little afraid though, when a solution costs
me 33% interest. I am inclined to believe that economic literacy is urgently
needed, because this is a war that has more than one battlefield. People resort
to payday loans for different reasons and circumstances, but when the solution
cost 33%, we need to be learning some stuff and trying to pass it along to our
future generations, or there may not be a future generation. Legislation, no
matter how good is simply a tool. We also must reduce the need for the
product. Predators are not stupid, and when the demand for a product exists,
someone will find a way to supply it.
The Montgomery Bus Boycott is an excellent example of legislation versus a
made up mind. The formation of the Antioch Credit Union and the Faith
Community Credit Union are examples of bureaucratic obstacles versus made up
minds. And we should not be afraid of the term economic literacy. One
consumer that found an alternative borrowing source, and shared it with others,
is a simple but effective form of economic literacy and the “Power of Association.”
When we make up our minds to become educated consumers, productive
business people, and become increasingly involved as sharing and caring
participants in the challenges that affect those around us, we will begin to end
the grip predators have on our wallets, our opportunities, our minds, and our
futures. Yes, lobby to pass Ohio House Bill 333, but take some time out to get
your own house in order. For additional information and other articles on
Education, Economic Literacy, Business and more, please browse our other
issues of VISIONS and other pages on this site.